[DAO Discussion] - Inverse Bonds

General Discussion
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Introduction:

I think many will agree that the rage quit ended up as a success. Those who wanted liquidity/and or a clean break have left and all holders who decided to stay enjoyed an increase in their relative share of wMemo.

But thinking about the future, I think having a mechanism and policy framework that can easily be deployed to defend backing price is long term healthy for the project. It ties the treasury value to the price of wMemo and increases investor confidence. There are several different ways of defending backing price. One way, is to use what are called inverse bonds.

WTF are inverse bonds?

First developed by the Olympus DAO, inverse bonds are exactly what the name implies, bonds where you give wMemo, and in exchange receive some of the treasury’s assets. It is not a redemption whereby one trades wMemo for assets in treasury at backing price. Inverse bonds therefore do not set a hard floor price at which the protocol will always buy but rather act as a way to lessen selling pressure below backing price - stabilizing prices and volatility.

Conditions for use:

Inverse bonds will be available for users if wMemo trades below liquid backing price on market.

The amount of bonds available will be capped at a specific rate as to prevent draining of the treasury.

Liquid Backing Price = (assets in treasury - wMemo in wMemo/Mim LP - locked assets) / supply of wMemo

Inverse bond premium is defined as the liquid backing price - market price. Premium goes down when more people buy inverse bonds, and goes up at some rate till someone buys the bond.

Example:

wMemo price is at $25k, liquid backing price is at $33k. You see that the inverse bond price has ticked up to a 5% premium. That means you will be able to sell your wMemo at $26.25k to the treasury, instead of $25k to the market. The inverse bond price would not be able to exceed $33k, because at that point it’s a net drain on the treasury. You buy the bond

Supposing you were to buy the bond you would in effect:

  • Increase the backing price/backing per wMemo
  • Not effect the liquidity of the wMemo
  • Sell/exit position without pushing the market price down
  • Decrease bond premium.

Numbers:

Currently the liquid backing price is $35.616k. (Thanks to @Reubz for the numbers)

So anytime market price falls below backing we offer a set rate of inverse bonds per week till market price reaches liquid backing price. We basically put a soft-floor, one which guides the price over time to be at or above liquid backing.

9 Likes
2

Didn’t Olympus try this. And it did fuck all.

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Nope they never actually had to deploy it. Price is above liquid backing

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It did, price is above backing, even if there is an idea of doing it helps, but I think this is one of the best ways to help price be pegged to backing price.

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I think inverse bonds are a great way to tie the wMEMO price to the actual liquid backing in the treasury.

If it can be implemented without too much stress for the dev team, I’m all for it.

Thanks

1 Like
6

I support this proposal and the idea of buying and burning under backing

7

Totally support this idea and it needs to be implemented ASAP. but quick question. What about the TIME TOKEN

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When minting was available on FTM it was switched to wMEMO. I would assume the focus would remain on wMEMO.

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OHM mechanism is good but people are not. Regarding whitepaper, apy is changeable so can decrease to zero if necessary. And, the bonding mechanism is the same too.

But the buyback mechanism is a must that is why I invested in Wonderland since the beginning. Insecurity is the biggest problem and fudders use that.

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